Litigation, regulation, legislation and some consternation emerged as dominant themes at the annual Pensions & Investments' East Coast Defined Contribution Conference, held March 1-3 in Miami.
Several speakers said the best way to reduce the risk of being sued or being called on the carpet by the Department of Labor was to make sure their DC plans develop clear policies and then follow them.
“ERISA doesn't demand perfection,” said Richard P. McHugh, a Washington-based partner in the law firm of Porter Wright Morris & Arthur LLP.
Because few investments will be considered bad on their face under ERISA, Mr. McHugh said plans' disclosure practices and review procedures take on great significance. DC plans get into difficulty when they don't establish clear procedures and/or don't follow the procedures they have created, said Mr. McHugh, one of the speakers on a panel about fees and investment decision-making.
Mr. McHugh said the baseball player Yogi Berra once provided important advice that should apply to fiduciaries: “You've got to be very careful if you don't know where you're going because you might not get there.”
DC experts said one key element to pursuing prudence is the investment policy statement, which can be both a helpful guide to sponsors' plan administration but which can also create some traps.
“Make sure you do what you say,” said Marla Kreindler, a Chicago-based partner at law firm Morgan Lewis & Bockius LLP, and a speaker on a panel about recent litigation.
Her clients were reviewing investment policy statements with an eye toward streamlining. “We talk to clients about what is helpful and what is unnecessary,” Ms. Kreindler said.
In an informal poll taken at the litigation panel session, DC executives in the audience were asked if they had an investment policy statement. Eighty percent said yes; 10% said no and 10% said they weren't sure.
DC consultant Lori Lucas, who also spoke at the litigation panel, said investment policy statements are a “very helpful guideline,” but they must strike a balance between being comprehensive and being too detailed. “You don't want two pages, but you don't want 30 pages,” said Ms. Lucas, the Chicago-based executive vice president and defined contribution practice leader for Callan Associates Inc. She recommended that these statements be reviewed annually.